Posts Tagged ‘Brazil’

While markets in some developed countries are demonstrating signs of recovery from the economic uncertainty of the last few years, and the growth in some developing markets is slowing, emerging countries remain attractive for insurance companies seeking opportunities for profitable growth. Latin America is an especially significant emerging region - it is rich in natural resources, geographically close to the United States and all of its governments are democratic. Before entering and engaging in business in this region, it is necessary for companies to be familiar with the economic environment, political situation, regulations, trends and risks that may be encountered.

Here we bring together recent GC Capital Ideas’ posts that have focused on the BRIC (Brazil, Russia, India and China) countries.

Increased Flood Loss Potential: Making use of all available tools and practicing comprehensive exposure management will both strengthen (re)insurers’ ERM practices and allow them to make informed risk management and reinsurance decisions as they enter new markets. Certainly, flood risk is prevalent and increasing in almost every developing economy.

Lloyd’s: What Will Success Look Like? If Lloyd’s is successful in achieving the growth and diversification outlined in its near-term and long-term strategic plans, it can expect to capitalize on business opportunities in emerging market economies such as the BRIC countries (Brazil, Russia, India and China). Growth, however, will not necessarily be limited to these markets. Other countries in Southeast Asia, Eastern Europe and Latin America are experiencing strong growth and increasing insurance penetration, and these territories also present attractive opportunities for Lloyd’s.

Growth Potential in Developing Markets:Positive premium growth trends in developing markets are expected to be sustained over the next decade. During this time, emerging markets are expected to drive global economic growth, and foreign direct investment in these emerging regions is likely to increase. In Brazil alone, investment in infrastructure is expected to amount to USD550 billion over the next few years as the country prepares to host the soccer World Cup in 2014 and the summer Olympics in 2016. China and India too are expected to continue to see robust growth in the next ten years.

State of the Reinsurance Market, Part II: Inflation/Deflation Expectations, Investment Returns: Expansionary monetary policy has fueled concerns that inflation could increase in the medium term, but the picture is less clear in the near term. While consumer price indices in Brazil, Russia, India and China (BRIC), the United States and the rest of the G7 currently exhibit positive trends, consensus forecasts show borderline disinflationary trends in the nearer term in the United States and many developed markets.

Positive premium growth trends in developing markets are expected to be sustained over the next decade. During this time, emerging markets are expected to drive global economic growth, and foreign direct investment in these emerging regions is likely to increase. In Brazil alone, investment in infrastructure is expected to amount to USD550 billion over the next few years as the country prepares to host the soccer World Cup in 2014 and the summer Olympics in 2016. China and India too are expected to continue to see robust growth in the next ten years.

As (re)insurers are challenged to deliver healthy, accretive returns in maturing and increasingly competitive markets, emerging markets present growth opportunities that may not be found in the United States or Europe. Regulatory challenges, tightening reserve levels and capital requirements, coupled with volatile global economies and a low interest rate environment, are forcing companies to seek non-traditional or emerging growth strategies.

Expansionary monetary policy has fueled concerns that inflation could increase in the medium term, but the picture is less clear in the near term. While consumer price indices in Brazil, Russia, Indiaand China(BRIC), the United States and the rest of the G7 currently exhibit positive trends, consensus forecasts show borderline disinflationary trends in the nearer term in the United States and many developed markets.

Reinsurance rates were flat to up slightly at the January 1, 2012, renewal in Latin America and the Caribbean. Protection and indemnity rates were up 5 percent across the board, along with Caribbean property. Latin American property treaty and facultative (not including the Caribbean) were flat to up 5 percent, and marine facultative ranged from flat to up 30 percent based on loss experience.

Regulatory changes feature profoundly in the reinsurance market in Argentina. As of September 2011, all reinsurance, effectively, must be ceded to “local” reinsurers. As a result, all treaties and most facultative covers with inception dates between September 2011 and December 2011 were canceled and rewritten to expire on June 30, 2011. Terms and conditions were maintained in this process and adjusted upward when there were adverse results.